DESFA sale doubts heighten following minister’s revisions

The finalization of a pending sale concerning a 66 percent stake of DESFA, the natural gas grid operator, to Socar now appears more uncertain than ever before following a negative reaction by the Azeri energy company to Greek energy minister Panos Skourletis’s decision to recently submit to Greek Parliament an amendment that drastically reduces the operator’s regulatory asset base (RAB), used to determine the operator’s revenues, including retroactive payments.

“If nothing changes, or, if the amendment is ratified as is, then I don’t see how this privatization can be carried out,” Anar Mammadov, managing director of Socar Energy Greece, the Azeri energy company’s local subsidiary, told energypress. Mammadov met with the Greek energy minister yesterday.

The DESFA sale has developed into somewhat of a saga. Socar had agreed to purchase a 66 percent stake of DESFA after winning an international tender in 2013 but, more recently, was ordered by the European Commission to surrender a 17 percent share and offer it to a certified European operator. This would limit Socar’s stake to 49 percent.

Although no official announcements have been made, it is believed Socar has reached an agreement with Italy’s Snam for the surrendered 17 percent.

However, establishing new network usage fees, DESFA’s source of revenue, have remained a pending issue not yet sorted out by RAE, Greece’s Regulatory Authority for Energy. This is a crucial detail for investor plans and decisions.

Skourletis, the energy minister, had made clear his intention of making revisions to prevent excessive network usage fee increases of as much as 68 percent, which would have been the case had the operator’s existing terms remained unchanged.

The minister had apparently informed both Socar and Snam officials of the move at meetings prior to his recent delivery of the amendment.

Greek government officials have contended that, based on DESFA’s existing terms, Socar would have paid 400 million for a 66 percent stake and been entitled to 547.14 million euros in past receivables, or 66 percent of an 829 million euro base. The amendment will reduce this amount by 200 million euros and offer payment over a 40-year period.

“The amendment and prices resulting from the amendment do not constitute the terms for this privatization and tender. One could say that these changes are part of the risk assumed by the investor, or buyer, when taking part in the tender,” Skourletis noted, while highlighting that the government does not intend to back down from the DESFA sale.

Mammadov, Socar’s local chief, contends that the Azeri energy company had made investment plans for a corporation whose value and prospective profitability have now been halved as a result of the revisions. “The price offered during the tender’s procedure does not make economic sense under the new conditions,” Mammadov supported.

TAIPED, the State Privatization Fund, has condemned the energy minister’s move, noting that action taken to avoid a “small gas price increase has now put to the test a privatization that was planned to rake in 400 million euros for the country.”

At this stage, it remains unclear whether the assertions being tossed about by all sides involved are genuine, part of the negotiating game, or something in between.